Questions and Answers
Establishment of Irish Water under BGE
Why has the Government decided to establish Irish Water under BGE?
The Government decided last December, based on the recommendations of an independent
assessment, to establish a public water utility company, Irish Water, to take over the operational
and capital delivery functions of local authorities in the water services area.
Further
consideration has been given since then as to whether Irish Water should be established as a new
entity or whether existing bodies in the Semi State sector could undertake the functions.
The outcome of this analysis is that Irish Water should be established as an independent state
owned company within the Bord Gais Group.
The move of water sector functions from local authorities to a semi-State company operating in a
regulatory environment and new funding regime which will include the introduction of domestic
water charges in due course is a major organisational change.
Establishing the new organisation under the umbrella of a mature semi-State, which is already a
regulated utility operating in the Irish corporate environment, has a number of advantages
including the existing expertise and experience to manage the set up with lesser risks than a
Greenfield set-up. BGE also has key capabilities that can be brought to bear in the set up of Irish
Water - a track record in raising finance, experience in operating as a utility in a regulated
environment, and has specific skills from its own experience of transformation; customer
relations, network management and metering and utility operation systems can also be quickly
deployed to assist in the successful establishment and operation of Irish Water.
BGE skills will be paired with the talent, experience, and commitment to service in local
authorities and the specific water and waste water capabilities that exist in local government to
build the new organisation.
How was this analysis undertaken?
The analysis was undertaken by a team comprising the Department of the Environment,
Community and Local Government and NewERA, in consultation with the Department of
Communications, Energy and Natural Resources. It involved a detailed submission and
presentations from the interested State agencies, based on capabilities required for the
establishment of Irish Water.
Is this the first step towards the privatisation of water services?
Irish water will be a public utility - there is absolutely no intention to privatise water services.
The investment in this sector is key to our strategic interests and legislation will restate the
existing prohibition on the privatisation of water assets. Internationally, publically owned utilities
are the norm in the water sector. Any revenue generated by Irish Water will be re-invested in
infrastructure, as there is a huge requirement for upgrading our infrastructure and providing new
infrastructure over the coming decade.
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When will LA staff move to Irish Water?
The high level transition plan set out in the independent assessment provides for a phased
transition of functions from local authorities to Irish Water. This transfer of functions requires
legislative underpinning in the first instance. From an operational perspective, it is envisaged that
local authorities will be engaged as agents of Irish Water for a considerable period of time. These
arrangements would end in 2017 at the earliest based on the independent assessment. The
majority of local authority staff will therefore remain in the employment of their authority for a
considerable period of time. However, this is a significant change, which will need detailed
engagement with Staff and Trade Unions. Following the decision today, work will be focussed
on the development of an implementation plan to provide a roadmap to addressing all the issues
arising in this reform programme. We will be engaging with ICTU in advance of finalisation of
this plan.
Will there be any staff reductions? When?
It will ultimately be a matter for Irish Water to determine the staffing and skills required for the
new organisation. In the initial phase, Irish Water will work largely through service level
agreements with local authorities. This will ensure a smooth transition to the new model and
guard against the loss of local expertise. It will also mean that the majority of staff will remain in
the direct employment of local authorities for a considerable period. These are key issues to be
addressed in developing the implementation plan, and will involve close co-operation with local
authorities, staff and the Unions to ensure that the change is managed well. The Department has
already had initial engagement with ICTU at the start of the independent assessment and as part
of the consultation process.
There will be further engagement during the course of the
development of the implementation plan.
When will the implementation plan be available?
We expect the plan to be finalised over the coming weeks.
Irish Water - Public Utility
Why is Irish Water being established?
This decision involves a major transformation and is not embarked upon lightly. It is based on an
independent assessment which examined the current system and international experience, and
which took comprehensive stakeholder soundings. It concluded that a public utility offers the
best opportunity to improve the efficiency and effectiveness of water services delivery, provide
access to new funding sources, and improve strategic planning and accountability. Quite simply,
we are faced with a substantial investment requirement in future years, a funding model that is not
sustainable, and a scale of operation which is not efficient or effective. Delivery through 34
separate authorities inevitably leads to fragmentation, inefficiencies and inability to achieve
economies of scale.
Why was a public utility being recommended?
The independent assessment concluded, based on an analysis of the strengths and weaknesses of
the current system, international experience and stakeholder soundings, that a public utility offers
the best opportunity to improve the efficiency and effectiveness of water services delivery,
provide access to new funding sources, and improve strategic planning and accountability. No
other model examined by the consultants would offer the same advantages.
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The local government system has served the country well in providing necessary water and
sewerage infrastructure. However, the fragmentation of the current structures, the inability to
achieve real economies of scale in delivery and operation, and the major investment challenge
that remains at a time of severe constraints on the public finances, means that new approaches are
necessary. Irish Water will have to build on the strengths of the existing system including an
experienced and committed workforce. Consequently Irish Water, although a national company,
will have a regional and local focus and a phased transition is proposed to ensure continuity of
service and the building of a fit for purpose organisation within a reasonable timescale.
Why was an independent assessment undertaken?
A specific requirement of the Programme of Financial Support for Ireland with the EU/IMF/ECB
is the preparation of proposals for implementation of the recommendations of an independent
assessment of the transfer of responsibility for water service provision to a water utility and that
water charges would be introduced. A team led by PricewaterhouseCoopers, which includes legal
and engineering consultants, was appointed through an open competition to conduct the
independent assessment.
What exactly will the Irish Water do?
It is proposed that Irish Water will be statutorily responsible for both investing and operating
water services infrastructure in its role as a provider of drinking water and waste water services to
household, commercial and industrial customers in Ireland (not served by Group Water Schemes).
It will be have responsibility for:
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The abstraction, treatment and distribution of drinking water;
The collection and treatment of waste water and sludge disposal;
Strategic planning for the sector including water resource management;
Source private finance for investment in capital projects;
The roll-out of the water metering programme;
Customer billing and relationship management, including requests for new connections;
Conservation of water supplies through maintaining and upgrading the infrastructure
including investment on mains rehabilitation.
The utility would need a regional and local focus, which would be achieved by organising
operational regions based on river basin districts. It would be responsible for the collection of
water charges, both domestic and non-domestic.
What is the timescale for implementation?
The proposed public utility model represents a major change with significant implications for
local government, the water industry in Ireland and its many stakeholders. The initial high level
transition strategy envisages a staged approach involving:
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The appointment of an interim board and Project Management Structures in 2012 pending
the establishment of Irish Water under its own statute by mid 2013;
Irish Water acquiring statutory responsibility for water services in mid 2013 and Local
authorities would be agents of Irish Water for a period with Irish Water taking over
their operations on a phased basis from January 2015, ending in at the earliest.
This transition plan will be refined and developed over the coming weeks in collaboration with
local authorities, BGE and NewERA leading to the development of a detailed implementation
plan. There will engagement with staff interests in finalising this plan.
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Will there be a need for continued Government funding?
Water services cost over €1.2 billion to run in 2010, of which operational costs amounted to some
€715 million, with capital costs of over €500 million. With revenue of just over €200 million
from non-domestic charges, the balance of around €1 billion is largely State funded, through a
combination of Exchequer grants and local authority resources, including the Local Government
Fund. Our capacity to fund the future capital investment requirements from the exchequer is
severely constrained. The Government’s plan for Infrastructure and Capital Investment 2012-16
shows a decline in exchequer capital investment in water and waste water services from €435
million in 2011 to €371 million in 2012 and a further decline to €296 million by 2014. That
reflects the serious pressures on the public finances.
The extent of future funding requirements will be determined through engagement with the
economic regulator on the level of charges, securing of operational efficiencies and the
appropriate level of capital investment and the extent to which Irish Water will be able to access
financial markets to fund its investment programmes. The nature and duration of continuing
Government funding, including the free allowance, will be determined as part of the budgetary
and estimates process.
Ensuring excellent customer service will be a top priority for the
Regulator.
Will local authorities have any role once Irish Water is set up?
As a public water utility, in a regulated environment, Irish Water will build on the strengths of the
existing system, to develop a sustainable financial model, leverage additional funding for
investment and achieve efficiencies through economies of scale. Irish Water will be working in
partnership with local authorities to achieve these aims.
While responsibility for water services will pass to Irish Water at a relatively early stage, local
authorities will remain very involved in the sector for a considerable period, acting as agents of
Irish Water in relation to operation and maintenance of services. This phased transition will
mean local authorities will operate under service level agreements with Irish Water for a
considerable period, doing exactly what they do on a day-to-day basis at present e.g. operating
and maintaining water and waste water treatment plants and networks, and finding and fixing
leaks. Irish Water will be setting the level of service, in light of its contract with the regulator,
and driving efficiencies and accelerated investment.
Local authorities will have an ongoing relationship with Irish Water on capital investment, to
ensure that Irish Water’s investment plans are aligned with local development plans and regional
planning guidelines. At the operational level, protocols will need to be in place to deal with
emergency situations, as local authorities will continue to the responsible for emergency
planning, and there will be situations where local authorities will have to assist Irish Water.
Transformation planning for the establishment of Irish Water will consider the interaction of the
proposed utility with local authorities and other key actors in the water environment
Will Irish Water have a local presence for delivery/customer support?
While a national customer service centre is likely to be created by Irish Water, work crews will be
located around the country for rapid deployment.
It is envisaged that to ensure operational
efficiencies, that Irish Water will have a regional focus to supervise and support the local
customer interface but also to support river basin management. While the number of operating
regions will be determined by Irish Water, it is expected that these will be based around the seven
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river basin districts. In the initial phase, Irish Water will work largely through service level
agreements with local authorities. This will ensure a smooth transition to the new model and
guard against the loss of local expertise.
Will Irish Water be responsible for septic tanks?
No. Responsibility for the registration and inspection of septic tanks will remain a function of
local authorities, who will still have a role in wider water management matters.
Metering and charging
What did the Government decide today in relation to charging?
The only decision taken by Government today was in relation to the establishment of Irish Water
as an independent State owned company within the Bord Gais Group. The Government were not
asked to take decisions on charges or the charging regime.
Will households be required to pay for their water meter and not the installation?
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Irish Water will commence meter infrastructure installation by the end of the year as
envisaged.
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There is absolutely no question of households being asked to pay for meters with an upfront
charge.
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The funding model (including the free allowance and metering programme) has yet to be
finalised and will be a matter for the Regulator.
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The Regulator will act in the best interest of the consumer.
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Similar to other utilities (Gas, Electricity) the consumer will pay for the delivery of water
services through a variety of payment options.
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It will be a matter for the regulator to decide how Irish Water’s overall costs/liabilities are to
be funded from the funds it generates/receives. These will include operational costs, capital
costs for future investment on new plant/water conservation, liabilities transferred from local
authorities, the loan from the NPRF, the free allowance etc. Funding will come from
borrowings from income from domestic and non-domestic charges, as well as continuing
funding from central Government. This decision is typically a matter for regulators whether
in the water or energy sectors.
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The level of charges and the nature, level and duration of continuing Government funding will
be determined, as part of the regulatory and budgetary/estimates process.
Why has the Government decided on a universal metering programme?
The Government believes that metering is the fairest way to charge households for water. The
introduction of volumetric water charges will provide households with an important incentive to
reduce their consumption of water. International experience suggests the introduction of water
meters can achieve a reduction in consumption of at least 10%. This will also reduce the
operational costs of providing water services as well as providing longer term savings in relation
to requirements for capital investment.
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Would it not be cheaper for the state to introduce a flat rate charge instead?
An important element in the introduction of water charges is to encourage reduced consumption
and flat charges do nothing to encourage households to use less water. Metered charges ensure
greater fairness and equity and provides householders with a degree of control over their bills.
How long will it take to rollout the metering programme?
The installation of meters will commence in 2012 and the programme will be rolled out on an
accelerated basis.
Will jobs be created?
The Department estimates that there is the potential to provide up to 2,000 jobs per annum from
the metering programme. The installation of the meters is labour intensive involving minor
excavation and reinstatement works after the installation of the meter. This will provide much
needed employment in the construction sector.
Do Irish companies have the experience to project manage this kind of a project or is it more
likely that a foreign contractor will win the business?
Yes, Irish companies are well equipped to undertake key elements of the programme. What is
envisaged are national supply contracts for the procurement of boundary boxes and meters and
some 150 to 200 local installation contracts. This will facilitate SME participation in the tendering
process as well as achieving best value for money for the State. Irish companies have the
capabilities necessary to tender for and be awarded the installation contracts.
How many companies will be involved?
As some contractors may tender for and be awarded a number of contracts, there could be in the
region of 50 to 100 companies involved.
What types of jobs?
The type of jobs involved will include general operatives, small excavator drivers,
plumbers/fitters, supervisors, site agents, contract managers and accounts and administration staff.
How do people apply for these jobs?
They will be employed by the contractors who are successful in bidding for the works.
What will the meters look like?
The meters will be installed in a boundary box with just a boundary box cover visible at ground
level similar to those that can be seen outside shops and other commercial premises at present.
How much does the meter cost?
The Department has prepared detailed cost estimates following extensive market soundings. It
would be inappropriate to release these estimates in advance of a competitive procurement
process. The cost of installing an individual meter will vary depending on the location of the
property.
There have been suggestions that the metering programme could cost up to €1 billion?
Some of the figures which have been suggested by commentators are seriously exaggerated. The
Department has prepared detailed costings based on extensive market soundings and on the
experience of purchasing and installing metering equipment in non domestic properties.
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Where will they be on the property?
Meters and boundary boxes will be located outside the curtilage of the property in the public
footpath or in the grass verge at the roadside.
Will household have to grant permission to access their land for installation?
Access to private property will generally not be required as meters/boundary boxes will be
installed outside the curtilage of the property in the public footpath or in the grass verge at the
roadside.
Is the meter connected automatically or will households have to give permission/do anything?
Householders will not have to give permission or do anything to facilitate boundary box
installation. A short interruption to water supply (in the order 2 to 3 hours) will arise while the
boundary box is being installed. Meters will be installed later.
What households can not be metered?
Certain categories of household may not be metered initially due to the high cost or technical
difficulty of doing so. These would include flat and apartment complexes as well as households
with shared service connections.
How many of them are there?
The Department estimates that up to 300,000 would not be metered individually initially.
What will be the level of charges?
The regulator will be responsible for determining the cost of water services, the approval of a
capital investment programme and the funding of that programme and the framework for levying
the charges. My Department will be consulting with the Regulator on these matters before the
introduction of water charges.
Will there be a standing charge?
The Regulator will be responsible for determining the framework for levying water charges. The
Department will be consulting with the Regulator in the coming months. Standing or network
charges are a common feature of charges for other utility services here in Ireland and
internationally.
Will the charge cover waste water?
Yes, the cost of providing water services includes the cost of treating waste water discharged to
the public sewer. However, not all households supplied with drinking water are connected to the
public sewer and similarly there may be properties connected to the public sewer who do not
receive a public water supply. These issues will be factored into the development of the charging
regime.
Can households provide their own meter?
There is a need to ensure a uniform standard of meter is installed to ensure accuracy of readings
and also to facilitate a common approach to the collection of meter readings. No other utility
service allows customers to install their own meter and there is no reason why a different
approach would be taken with water meters.
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How much will the free allowance be?
No decision has been taken on the level of free allowance. My Department will be consulting
with Regulator on the approach to the free allowance in advance of the introduction of water
charges.
What about affordability for low income and other households who have a high essential use for
water?
The Government will ensure that measures are in place in advance of the introduction of water
charges to address affordability issues, including situations where a medical condition might
require a higher essential use of water.
How much will the metering programme cost and how will it be funded?
It would be inappropriate for me to release these estimates in advance of a competitive
procurement process. It is intended that the metering programme will be funded through
borrowing on commercial terms from the National Pension Reserve Fund.
How will quality control be ensured?
A quality assurance system will be put in place to ensure that contractors install the boundary
boxes and meters to a common and agreed set of standards.
Will houses on group supplies or private wells be required to pay water charges?
The programme of metering and charges only applies to households connected to a public water
supply.
Economic Regulation
What will the role of the Economic Regulator be?
The economic regulation functions are being assigned to the Commission for Energy Regulation.
Legislation will govern the functions and operation of the Economic Regulator. The main role of
the Regulator will be to protect the interests of customers. The regulator will be responsible for
determining the cost of water services and ensuring that efficiencies are delivered so that the cost
of providing the service to the consumer is kept to a minimum. The Regulator will ensure there is
a framework where water charges are fair and clear in their implementation and that policies are
in place to address affordability issues.
Will consumers be consulted by the Regulator?
The protection of consumers will be the key role of the Regulator and it would be expected that
there will be consultation with consumers as is the case in other regulatory systems e.g. OFWAT,
the water regulator in the UK regularly consults on issues of concern to the consumer e.g.
performance standards, affordability, etc.
Water conservation measures
Will the Government be incentivising water conservation measures?
From an environmental point of view, the best way to conserve water is to incentivise people to
use less. Furthermore, the OECD (2010) has concluded that water metering is unequivocally the
fairest way to charge for domestic water usage.
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The public finances do not currently allow for any specific funding of water saving measures,
however in other jurisdictions other water companies do provide support to householders and
householders can take actions to minimise their own water usage and the charges arising.
What actions can householders take to conserve water?
Householders can ensure that there are no leaks within the curtilage of their property, that any
dripping taps, toilet cisterns or showers are repaired, that taps are not left running when washing
their teeth or washing fruit and vegetables. They can also collect rainwater for plant or garden
watering rather than using tap water. When replacing domestic appliances such as showers,
dishwashers and washing machines, householders should purchase water efficient, as well as
energy efficient, appliances. The website www.taptips.ie provides useful advice as to how to
conserve water.
What is the State doing about leakage?
Most of the investment and work so far has been of a preparatory nature with the establishment of
district metering areas at local authority level to show where water is being lost and allow the
local authority to better target their leak detection and repair and facilitate the identification of
mains requiring rehabilitation/replacement. Mains rehabilitation strategies have also been
developed by local authorities. The priority now is to undertake the mains rehabilitation work and
fix the leaks. Water conservation measures have, therefore, been given a particular priority within
the Water Services Investment Programme 2010-2012. This will be a top priority for the new
public utility.
Would it not be preferable to address leakage rather than install meters?
The cost of the metering programme will be finally determined through public procurement.
However, our cost estimates indicate that the savings in consumption and customer side leakage
arising from investment in water metering, with consumption based charges, would reduce water
demand by 2 to 3 times the level which would arise from a similar level of investment in the
public water main replacement. Of course, investment in leak detection and repair and in mains
rehabilitation/replacement on the distribution network will continue in parallel with meter
installation and for many years thereafter.
Key Statistics – Water consumption facts
Domestic water consumption in average sized household is 145 litres per person per day.
Using national average house occupancy rate of 2.8 (2006 Census), water consumption in an
average household is 148 cubic metres per annum.
Apportionment of household water consumption is typically:
Drinking water
3%
Shower/bath
32%
Toilets
28%
Washing machine
12%
Sink/dishwasher
22%
External use
3%
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Washing
Machine
12%
Shower
14%
Dish Washer
4%
Bath
18%
Sink
18%
External
3%
Drinking Water
3%
Toilet
28%
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